On May 21, 2020, FERC issued Opinion No. 569-A, which revised the Commission’s methodology for determining whether an established rate of return on equity (“ROE”) is just and reasonable under section 206 of the Federal Power Act (“FPA”). Among other things, Opinion No. 569-A accepts the use of a third financial model for establishing just and reasonable ROE for Transmission Owners (“TOs”)—the “Risk Premium Model” (which was rejected in an earlier opinion)—in addition to the previously accepted two-step discount cash flow (“DCF”) model and capital asset pricing model (“CAPM”). Commissioner Richard Glick dissented in part, arguing that FERC was “once again changing course and revamping [its] ROE methodology” to the detriment of regulatory certainty among TOs and investors. In a related action, FERC contemporaneously issued a Policy Statement clarifying that the newly revised ROE methodology in Opinion No. 569-A applies to natural gas and oil pipelines, with certain exceptions.
Continue Reading FERC Revises Public Utility ROE Methodology; Sets Policy for Natural Gas, Oil Pipelines

On May 1, 2020, the U.S. Department of Energy (“DOE”) issued a Notice of Proposed Rulemaking (“NOPR”) to update its National Environmental Policy Act (“NEPA”) implementing regulations concerning applications to import to, or export from, liquid natural gas (“LNG”) terminals. In particular, DOE has previously determined that the transportation of natural gas by marine vessels normally does not pose the potential for significant environmental impacts, and accordingly, exports of LNG should be considered a “categorical exclusion” from NEPA review.  Comments are due June 1, 2020. 
Continue Reading DOE Proposes to Limit NEPA Review for LNG Export Applications

On May 7, 2020, FERC’s Division of Audits and Accounting issued a guidance letter on how regulated entities may account for expected credit losses on accounts receivable.  The letter, issued to ease regulatory burdens on the energy industry in the midst of the ongoing COVID-19 pandemic, clarifies that Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) No. 2016-13 is an acceptable methodology for purposes of financial accounting and reporting obligations on jurisdictional public utilities and licensees, natural gas companies, oil pipeline companies, and centralized service companies.
Continue Reading FERC Issues Guidance on Accounting for Credit and Accounts Receivable Losses

On April 24, 2020, FERC largely upheld an earlier-issued order imposing additional transparency obligations on Midcontinent Independent System Operator, Inc. (“MISO”), Southwest Power Pool, Inc. (“SPP”), and PJM Interconnection, L.L.C. (“PJM”) (collectively, “RTOs”) regarding the RTOs’ Affected Systems study processes. FERC declined to require holistic alignment of the RTOs’ interconnection study processes, but clarified that, in subsequent compliance filings, the Commission will scrutinize whether each RTO applies the Energy Resource Interconnection Service (“ERIS”) or Network Resource Interconnection Service (“NRIS”) modeling standards in a just and reasonable manner.
Continue Reading FERC Denies Rehearing, Partially Grants Clarification on MISO, SPP, and PJM Affected System Study Coordination Order

On May 1, 2020, President Trump issued Executive Order No. 13920 (“Executive Order”) prohibiting Federal agencies and U.S. persons from engaging in certain “transactions” defined thereunder—specifically, acquiring, importing, transferring, or installing certain items defined in the Executive Order as “bulk-power system electric equipment”—with “foreign adversaries.” Such equipment classifications and types are specified in the order and include “items used in bulk-power substations, control rooms, or power generating stations.” The prohibitions apply to transactions involving such equipment if such items are (i) designed, developed, manufactured, or supplied by a foreign adversary, or by persons under the control, direction, or jurisdiction of such adversaries and where (ii) such equipment pose an unacceptable risk to national security and America’s safety.
Continue Reading Executive Summary of Executive Order 13920 — Securing the U.S. Bulk-Power System

On April 22, 2020, FERC accepted tariff revisions from Southwest Power Pool, Inc. (“SPP”) to comply with a October 17, 2019 order accepting in part SPP’s Order No. 841 compliance proposal (the “October Order”). FERC also directed SPP to submit a further compliance filing to specifically exempt run-of-the-river hydroelectric, wind, and solar resources from the continuous minimum run-time requirement under SPP’s Resource Adequacy tariff provisions and Planning Criteria.
Continue Reading FERC Accepts SPP Resource Adequacy Compliance Filing, Subject to Further Compliance

On April 17, 2020, FERC granted the North American Electric Reliability Corporation’s (“NERC”) request to defer implementing several Commission-approved Reliability Standards that have effective dates or phased-in implementation dates in the second half of 2020. NERC argued the deferred implementation would not hamper grid reliability but would instead allow NERC-registered entities additional flexibility to continue prioritizing worker safety and reliability during the COVID-19 pandemic.
Continue Reading FERC Defers Implementation of Certain NERC Reliability Standards, Citing COVID-19

On March 27, 2020, FERC denied NorthWestern Corporation’s (“NorthWestern” or the Company) petition for a declaratory order regarding Qualifying Facility (“QF”) avoided cost pricing during times of excess generation. In its petition, NorthWestern asked the Commission to determine that (1) when excess generation occurs, QF pricing should be set to zero, and (2) nothing in the Public Utilities Regulatory Policies Act (“PURPA”), including the rule against non-discrimination in avoided cost pricing, permits establishing a rate in excess of the utility’s avoided cost. In exercising its discretion to deny the petition, FERC did not reject NorthWestern’s request on the merits, but rather, stated that whether avoided energy costs can be zero depends on the facts of the case, and that NorthWestern had failed to provide sufficient information to support its request.

Continue Reading FERC Declines Opportunity to Weigh in on Zero Avoided Cost Pricing under PURPA